Faster MasterCard Growth Seen Despite Citi Card Woes

Despite sluggish U.S. card volumes from its biggest bank issuer, MasterCard (MA) is expected to show accelerating revenue and profit growth when it reports Q4 results on Thursday.

Earnings are seen rising 20% vs. the prior year to $4.82 a share on revenue of $1.89 billion, up 9%, according to Thomson Reuters. That would snap a four-quarter string of decelerating profit and sales growth.

But Nomura Securities analyst Bill Carcache expects MasterCard's U.S. purchase volume to decelerate from Q3's pace due to weak volume at its largest issuer, Citigroup (C). That is likely to hurt U.S. credit results.

That said, Carcache's Q4 earnings forecast is 11 cents above the consensus views. Reasons include improving volumes at smaller issuers such as Bank of America (BAC) and Capital One (COF), declining foreign-exchange head winds and higher-than-expected share buybacks.

"We're looking for an upside surprise," he said in an email.

Jefferies analyst Jason Kupferberg, who is essentially in line with consensus, noted that rebates and incentives "can always be a bit of a wild card."

In a research note, he said consumer spending has remained sluggish but that U.S. consumer confidence is improving. U.S. retail sales growth "was steady" in Q4 vs. Q3, at 3.7% vs. 3.8%, respectively, he noted.

Growth in international plane boardings, a rough proxy for cross-border business at both MasterCard and Visa (V) slowed in the quarter, Kupferberg added.

Visa reports on Feb. 6.

Kupferberg says he has a "modest preference" for Visa due to its "business model, competitive moats and global secular tailwinds."

MasterCard is more exposed to Europe, which is still reeling from economic strains and faces European Commission-related regulatory risk.

Analysts expect MasterCard to report revenue growth of 10% in 2012 and 12% in 2013. Kupferberg thinks the latter forecast could be a little high.

Despite sluggish U.S. card volumes from its biggest bank issuer, MasterCard (MA) is expected to show accelerating revenue and profit growth when it reports Q4 results on Thursday.

Earnings are seen rising 20% vs. the prior year to $4.82 a share on revenue of $1.89 billion, up 9%, according to Thomson Reuters. That would snap a four-quarter string of decelerating profit and sales growth.

But Nomura Securities analyst Bill Carcache expects MasterCard's U.S. purchase volume to decelerate from Q3's pace due to weak volume at its largest issuer, Citigroup (C). That is likely to hurt U.S. credit results.

That said, Carcache's Q4 earnings forecast is 11 cents above the consensus views. Reasons include improving volumes at smaller issuers such as Bank of America (BAC) and Capital One (COF), declining foreign-exchange head winds and higher-than-expected share buybacks.

"We're looking for an upside surprise," he said in an email.

Jefferies analyst Jason Kupferberg, who is essentially in line with consensus, noted that rebates and incentives "can always be a bit of a wild card."

In a research note, he said consumer spending has remained sluggish but that U.S. consumer confidence is improving. U.S. retail sales growth "was steady" in Q4 vs. Q3, at 3.7% vs. 3.8%, respectively, he noted.

Growth in international plane boardings, a rough proxy for cross-border business at both MasterCard and Visa (V) slowed in the quarter, Kupferberg added.

Visa reports on Feb. 6.

Kupferberg says he has a "modest preference" for Visa due to its "business model, competitive moats and global secular tailwinds."

MasterCard is more exposed to Europe, which is still reeling from economic strains and faces European Commission-related regulatory risk.

Analysts expect MasterCard to report revenue growth of 10% in 2012 and 12% in 2013. Kupferberg thinks the latter forecast could be a little high.

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